NF Football Investments Limited (1) Nottingham Forest Football Club (2) and NFFC Group Holdings Limited (1) Fawaz Al-Hasawi (2) (2018) EWHC 1346 (Ch)
The High Court recently held that an entire agreement clause in a share sale agreement was effective to preclude the buyer from bringing a claim in misrepresentation. The case is of relevance to commercial contracts generally, including contracts for the sale and purchase of land or property.
NFFC Holdings and Mr Al-Haswi (the Seller) sold the shares in Nottingham Forest Football Club to NF Football Investments Limited (the Buyer). The Buyer complained that the Seller had misrepresented the Club’s liabilities prior to the purchase. There was an entire agreement clause in the contract which the Seller said precluded the Buyer from bringing a claim in misrepresentation. The Seller made an application to strike out the claim on the basis that there was no real prospect of it succeeding.
Master Bowles found that the parties had intended to exclude misrepresentation claims and granted the strike out application for the following reasons:
- The Buyer relied on the case of Axa Sun Life Services Plc v Campbell Martin Limited & others (2012) and argued that the matters excluded by the entire agreement clause were only matters of a contractual nature and so did not exclude liability for misrepresentation. However, the Master found that the clause was incredibly wide and excluded matters of a contractual nature (for example, agreements, promises and negotiations) as well as of a non-contractual nature (for example, discussions, representations and understandings).
- The guidance in Axa that any exclusion of liability for misrepresentation in any contract must be clearly stated was also considered by the Master. Exclusion of liability for misrepresentation is usually achieved by a non-reliance clause (which raises an estoppel). However, the Master did not consider that Axa meant an effective clause purporting to exclude liability for misrepresentation must be set out in a particular form. The meaning of a clause in a contract must always be a matter of construction of that clause in its particular context.
- In light of those points, the Master found it particularly relevant that there was a specific indemnity contained within the contract for all losses incurred by reason of any misstatement or misrepresentation of the Club’s liabilities. There were also other contractual indemnity provisions relating to losses suffered or incurred by reasons of any misstatement or misrepresentation as to the Seller’s shares in the Club, the power to sell those shares or any material contracts not lodged in the data room, for example. The Master therefore considered that the parties had taken steps to ensure that any misrepresentation claims likely to arise were to be dealt with within the four walls of the agreement. Therefore, the entire agreement clause was effective.
It is important to bear in mind that this is a decision made on a strike out application and not as a result of full trial. It is unusual because Courts have been reluctant to interpret entire agreement clauses as excluding claims for misrepresentation. Moreover, section 8 of the Unfair Contract Terms Act 1977 limits the freedom of parties to contract out of the effect of the Misrepresentation Act 1967 in certain respects and that Act was not considered by the Master at all.
The standard conditions of sale in contracts for the sale and purchase of land limit a Seller’s liability in the case of misrepresentation although some Sellers may choose to go further than this and exclude any misrepresentation claim. The case is of interest because it indicates that it is not possible to lay down generalised rules about contractual clauses and Courts will look at the contract as a whole to understand the intention of the parties. Therefore, even if there is no non-reliance clause contained in the contract it should not be assumed that a party will be able to bring a claim in misrepresentation. It should be borne in mind that a widely drafted entire agreement clause may cause problems for a buyer seeking to bring such a claim.